Computer and Software Purchases Are Capital Expenditures, Even Though the Expected

question 37

True/False

Computer and software purchases are capital expenditures, even though the expected useful lifetime of computer hardware and software has decreased in recent years because of rapid technological change.

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Definitions:

Maintenance Costs

Expenses incurred to keep an asset in good working condition or to repair it so it continues to operate effectively.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time, used in capital budgeting to analyze the profitability of an investment.

After-tax Salvage Value

The estimated value of an asset at the end of its useful life, after deducting any taxes owed from its disposal.

Required Rate of Return

The minimum expected return an investor demands for the risk associated with holding an investment.